Senator David Norris' address to Seanad Eireann (the Irish Senate)

In Sept. 2007, fourteen months before Ireland's bank bailout, I resigned from my position as the Risk Manager of UniCredit Bank Ireland. I did that in order not to incriminate myself. I have spent the last 4 years seeking justice. On Feb. 23rd., 2010, I was fortunate to have Senator David Norris raise the matter in Seanad Eireann (the Irish Senate), and request a response from the Minister of Finance, Mr. Brian Lenihan. Senator Norris concluded by stating that:

"...there is ministerial responsibility in this matter.
This is a grossly serious matter which has been reported to the Financial Regulator. A man has lost his job as a result. He honourably resigned. The degree of breach was 40 times the accepted margin. This is a disaster. If we are not prepared to face the issue and investigate it when it has been laid before the House, there is absolutely no hope for the financial system or its reputation worldwide...How can the Financial Regulator investigate himself? He was in breach of his responsibility."

In Nov. 2011, Emma Alberici, Europe correspondent for ABC TV, told my story as part of her documentary 'Going Rogue' which featured Nick Leeson and Sir John Vickers among other interviewees. It is ironic that at a time when the Irish tax-payer is bailing out un-secured bond holders, my story which occurred in Dublin, is deemed of interest to the Australian TV license payer. Please click on 'play video' on the following link:

Ireland sometimes seems like a perfect vacuum! No matter how much you and I and others shout, nothing ever happens in return, not even an echo.

There is no accountability. Criminals are elected to the Dail simply because they are "indispensable". Their voters are loyal to him because they share in an unequal allocation of patronage even though equality is supposedly guaranteed by law.

Ireland knows what it has done and is content to appear discontented! There are no riots as in Greece. There is an old tradition in both countries of emigration, a shameful indictment of the lack of opportunity for those outside the nomenklatura.

You are to be commended for trying to remind them of their collective dishonesty.

Those who take a long view, consider that the lesson is actually lost on them. You and I and the Rothschilds should set them up, if we are around in forty years or so? They will fall for it again...... The idea of checks and balances escapes them!

"Ireland was forced by the European Central Bank into seeking an international bailout in November, the Irish Times cited Brian Lenihan, then finance minister, as saying in an interview.

Lenihan said that it was “damaging” and a “betrayal” how some ECB governing council members briefed some media about Ireland, the paper said in a report published today.

Ajai Chopra, deputy director for Europe at the International Monetary Fund, said external authorities were “trying to avoid a situation where you had a fully fledged bank run” as the IMF and European Union shaped the aid package, the Irish Times cites Chopra as saying in an interview."

Well, well, Mr. Lenihan, how times have changed. It would seem that you are suffering from the same condition of 'Convenient Amnesia' that your successor in office - Minister Noon, is suffering from. Allow me to remind you what Deputy Brady said on your behalf to Senator Norris in the Seanad just over a year ago:

"The Financial Regulator imposes quantitative and qualitative standards for liquidity for all credit institutions that it supervises, be they credit institutions operating in the domestic market or those operating in international markets...The Financial Regulator also has a role in monitoring the functioning of liquidity within branches of credit institutions operating in Ireland where these are supervised by their home country regulator. The Financial Regulator maintains close communication with the regulators of other member states for this purpose.

....The importance of good liquidity management to the soundness of individual institutions and the financial system as a whole has been made abundantly clear from events throughout the recent financial crisis. The crisis clearly highlighted that, without good liquidity management principles and practices, financial institutions would quickly find themselves under stress and unable to meet their obligations. Internationally, the ample supply of liquidity in the years preceding the onset of the financial crisis in 2007 left many credit institutions unprepared for the shocks that occurred and many credit institutions struggled to maintain adequate liquidity throughout the financial crisis. For this reason, the European Central Bank and other central banks have been providing extraordinary liquidity support for financial institutions throughout the eurozone during the current financial crisis. These measures were introduced at the discretion of the ECB to deal with the liquidity crisis affecting the European-wide banking system. Irish credit institutions and many European credit institutions have obtained liquidity support [47]provided by the bank. However, dependence on ECB lending has been significantly reduced, indicating that conditions in international financial markets have improved substantially and Irish credit institutions have benefited from improved funding conditions which has been reflected in reduced recourse by Irish banks to Eurosystem funding. The ECB has indicated publicly that it is engaging in the progressive, timely and gradual phasing out of the non-conventional measures which were introduced in response to the financial crisis but that, notwithstanding this, liquidity support will remain for months to come. As such, there are no negative implications in the medium term from the announced “phasing out” measures. "

So, Mr. Lenihan, apart for the fact that the "phasing out" of liquidity assistance was reversed, full-speed, into trying to plug the hemorrhaging condition of the Irish banks by the ECB/IMF only NINE months after you made this statement that "Irish credit institutions have benefited from improved funding conditions", how come you're 'not friends any-more' with your ECB mates? Why have you waited this long to make this confession? Could you not make it while still in office? Who was stopping you? Brian Cowen? Ollie Rehn?

Tuesday, 19 April 2011

The Government is to hold a referendum later this year to enable Oireachtas committees to compel witnesses to attend hearings. The development follows the publication of the Nyberg Report into the Irish banking crisis.

At a press conference this afternoon, Finance Minister Michael Noonan said the previous Government had failed to deal with the Abbeylara court decision which had limited the powers of investigation of committees...

REALLY?!? Minister Noonan, the Mr. Nyberg was was appointed on Sept 22nd. 2010, seven months after Senator David Norris raised the issue of the liquidity catastrophe at UniCredit Ireland which was ignored by the Financial Regulator.

Sepetmber 2010 was FOUR months after I met with a senior Fine Gael deputy at a law firm in Ballsbridge. This is the meeting you allegedly know nothing about, why else would you have issued such a sweeping denial of the fact that Fine Gael had had any dealings with me?

Sepetmber 2010 was also two years after the entire Irish banking sector ran dry of liquidity which was why the 'blanket gurantee' was put in place. Now you want to "compel witnesses to attend hearings"? I volutarily provided Fine Gael with an account of the liquidity breaches at UniCredit Ireland, and this was evidenced by a very senior banker. What more could you have wanted?

Please Minister Noonan, spare us the drama. We will be paying for the Fianna Fail saga for generations to come. We expected more of our new government.

PS

If it is the 'honest truth' that you are after, how do you explain the fact that Kathleen Barrington of the Sunday Business Post can not get a straight answer from anyone in official Dublin in regard of Anglo's austrian deposists? Let us not forget that Anglo is now headed by a FG man.

Are we bailing out via NAMA and/or other schemes people who are allegedly bankcrupt, but actually have millions stashed away in a bank which is now Swiss-owned? We do not want names, just a simple Yes/No answer will suffice. Surely now that we, the people of Ireland, own Anglo-Irish Bank, we are entiteled to know what it got up to in the 'good old days'.

Monday, 18 April 2011

Now that we have officially been told by Moody's that our banks are junk, is there any chance that you might break with the tradition of your predecessors in office and start telling us THE TRUTH?

Frankly, we, the Irish people who are struggling to make ends meet, would like to know once and for all what the REAL situation is. We are sick and tired of relying on foreign entities like Moody's, S&P, ECB & IMF in order to discover what goes on in our own back yard.

Further to my posting below from last Thursday, I would like to share some more correspondence with Fine Gael. This might serve to refresh your memory and that of your senior colleagues. It is rather surprising that you had chosen to completely deny that I had had any dealings with Fine Gael.

---------- Forwarded message ----------

From:

Date: 11 June 2010 09:11

Subject: Re: Update

To:
Hi N.,

Thank you for the update.

I look forward to hearing from you if/when there are any further developments....

Regards,

On 10 June 2010 16:48, N wrote:

Hi ...,

Deputy X [of Fine Gael, WB] has been in touch with the Financial Regulator, and set out the concerns raised at the meeting on the matters which do not appear to have been addressed. I understand that these concerns are being followed up by the Regulator who has promised Deputy X a reply in due course.

I gather that the Regulator may be contacting you directly in order to garner more information. Perhaps you could let me know if you have received any more information since then.

By Kathleen Barrington If I asked how much your house was worth, you probably couldn’t tell me for sure.

You might guess it is worth half what it was worth at the peak of the boom.

Or you might fear it is worth even less, as there is a house on the road quoting half the peak price and it still hasn’t found a buyer.

There is no reliable indicator of what the market price of houses currently is.

The Permanent/ TSB ESRI index is based on too small a sample, while data protection laws prevent estate agents from disclosing transaction prices even if they were minded to do so, although Friday’s distressed sale auction by Allsops has partially helped fill the information gap.

Things aren’t much different in the world of high finance. Many bankers don’t really have a clue what once-valuable assets are now worth, as the assets rarely trade (and when they do, the prices they fetch aren’t necessarily disclosed on a stock exchange).

Bankers may also fear trading those assets as the price they would achieve might be so low as to do damage to their balance sheets and force them to raise new capital.

This is the case with asset backed securities, particularly those securities backed by mortgages of doubtful quality. It is also true of sovereign bonds issued by countries with big deficits as well as corporate bonds issued by institutions that are under stress.

Many European financial institutions still carry these troubled assets on their books.

That is why, three and a half years into the credit crunch, many banks are still struggling with the legacy of the collapse in market confidence which began in August 2007.

Take, for example, the accounts of UniCredit Bank Ireland plc, a subsidiary of Italy’s largest bank, UniCredit.

UniCredit’s Irish operations are pretty substantial with total assets of €23.7 billion at the end of 2010.

Many of those assets include the complex financial instruments that have proven difficult to value ever since the credit crunch hit.

UniCredit Bank Ireland has, by its own admission, endured a difficult period for liquidity, and was among the banks that availed of emergency amendments to accounting rules introduced in October 2008 at the height of the financial crisis.

The Irish subsidiary, which is based at the International Financial Services Centre (IFSC) in Dublin, reclassified about €3 billion of assets in 2008.This meant that those assets did not have to be valued at market prices which were then in turmoil.

UniCredit Ireland continued to avail of this accounting treatment in subsequent reporting periods.

The bank did it again in 2009 and then also in the 2010 accounts, which were filed in the Companies Office in recent weeks.

Writing in the annual report, chairman Ronan Molony said the significant turmoil experienced in 2008 and 2009 continued in 2010, culminating in Ireland accepting the bailout in November.

This had a negative affect on UniCredit Bank Ireland’s funding costs.

However, Molony reckoned the bank had produced a ‘‘satisfactory’’ result for the year, taking into account the ‘‘considerable market headwinds, recording a net profit after tax of €89 million compared with a net profit after tax of €131 million the previous year.”

But the notes to the accounts reveal that the continued use of the emergency accounting treatment flattered the company’s reported profit figure by €63 million in 2010.

The reclassification is permissible under the emergency accounting rules which were introduced at the height of the crisis. In the case of UniCredit Bank Ireland, the reclassified assets are now described as ‘‘loans and receivables’’, whereas previously they were described as ‘‘held for trading’’.

If they were still described as ‘‘held for trading’’ they would have to be written down to their current market value, which would dent the reported profitability of the Irish subsidiary.

Elsewhere, the accounts show that there was a €344 million reduction in the value of certain assets which were available for sale during2 010.However, this reduction has been written off against shareholders’ equity rather than to the profit and loss account, a move which accountants say is entirely legitimate, but which also flatters headline performance.

It is true that UniCredit’s performance at group level continues to appear stellar when compared with the performance of our own Irish banks.

In March, UniCredit reported fourth quarter net income of €321 million, down from €371 million a year earlier after provisions more than doubled to €472 million.

The bank generated full year profit of €1.3 billion, down 22 per cent from a year earlier.

But there are concerns that the bank’s expansion into eastern Europe, and elsewhere, may lead to greater loan losses in future, which would require the bank to raise new capital. This has been reflected in a fall in UniCredit’s share price over the last few years.

The shares closed at €1.71 last week, compared with €5.06 in August 2007 when the credit crunch began.

UniCredit has been under particular pressure ever since the banking foundation Cari Verona, one of its largest shareholders, declined to take part in a rights issue at the height of the credit crunch in 2008.

The decision to accept those funds contributed to the loss of shareholder confidence in UniCredit chief executive Alessandro Profumo, who was ousted last year. It has proven even more embarrassing now that Gaddafi’s own people are in open revolt against his rule.

There have been repeated suggestions that UniCredit may be forced to raise new capital either through asset disposals or fundraising.

Among the assets that might be disposed of is Pioneer Investments, its IFSC-based fund management division.

It just goes to show that in this global financial crisis, a road that leads to Rome may well also lead back home.

Thursday, 14 April 2011

Minister Noonan, following a recent headline in the Irish Times (quote below) may I presume that you will be asking the DPP (Director of Public Prosecution) to investigate the conduct of UniCredit Ireland as well?

Should you require further information, please see Village magazine's December cover story:

Still waiting for the truth from the regulator

I was rather disappointed to receive the email below which you had sent last November. The person whom you sent it to has contacted me via my blog. Pity you can't remember the complaint you had made about my conduct on the phone with your secretary when I called to follow up on a meeting I had had with one of your prominent colleagues.

Subject: Re: Are Fine Gael complicit in covering up a whistleblower's report?

To: ........Dear M.,Thank you for taking the time to write to me. Unfortunately I have noknowledge of the case you mention and I can assure you that Fine Gael isnot complicit in a cover up of any banking irregularities and I have notbeen contacted by this whistleblower.

Best wishes.

Michael Noonan TDFine Gael Spokesperson on Finance

The Irish Times - Saturday, April 2, 2011

Noonan sends report on bank crisis to Gardaí and DPP

SIMON CARSWELL, Finance Correspondent

MINISTER FOR Finance Michael Noonan has referred the Nyberg report into the banking crisis to the Garda, the Office of the Director of Corporate Enforcement and the Director of Public Prosecutions.
This is the first time a report on banking practices in all the guaranteed lenders has been submitted to the Garda, the DPP and the ODCE. A Department of Finance spokesman confirmed the report had been referred on the advice of the Attorney General. The Minister received the final report from the Nyberg commission of investigation on March 22nd and referred it to the Attorney General.
The commission, led by the former senior Finnish civil servant Peter Nyberg, spent six months investigating the banking crisis, examining Anglo Irish Bank and Irish Nationwide Building Society in particular. Mr Nyberg was asked to investigate corporate governance and risk management at the six Government-guaranteed institutions from January 1st, 2003, to January 15th, 2009, when the decision to nationalise Anglo was taken.
The inquiry focused closely on lending practices at Anglo and Irish Nationwide to examine why they incurred much heavier losses.
Mr Nyberg did not name any individuals in his report, which was commissioned by former minister for finance Brian Lenihan.
It followed two reports into the causes of the crisis last year by Central Bank governor Patrick Honohan and banking experts Klaus Regling and Max Watson.
The Central Bank plans to examine bank directors’ records in the run-up to the crisis and, if necessary, launch formal investigations to suspend or prohibit individuals from involvement with finance companies. The head of financial regulation
Matthew Elderfield said on Thursday that he would write to bank boards to give directors an opportunity to decide whether they wanted to go through that examination process.
The ODCE and the Garda are already investigating issues relating to Anglo including:
● the €7 billion deposits between the bank and Irish Life and Permanent which made Anglo look healthier than it actually was over its September 2008 year end;
● the secret share deal in which it made loans of €451 million to 10 customers to buy a 10 per cent stake held by Seán Quinn;
● the concealment of loans to former chairman Seán FitzPatrick over an eight-year period;
● an €8 million loan given to a director, Willie McAteer, to prevent his Anglo shares being sold on September 29th, 2008; and
● the content of financial and public statements in 2008.

Irish regulator says Anglo's senior bonds at risk

(Reuters) - Ireland may try to impose losses on senior bondholders in two defunct lenders if they need more capital, the banking regulator said on Wednesday, potentially putting the country on a collision course with the ECB.

The Frankfurt-based European Central Bank, which is helping keep Irish lenders afloat, is opposed to Ireland hitting senior bondholders with any losses in case it sparks contagion within the euro zone, exacerbating the bloc's debt crisis.

Matthew Elderfield, head of financial regulation at Ireland's central bank, said the government accepted the ECB view that it should not impose losses on senior bondholders in the country's four remaining lenders, but Anglo Irish Bank and Irish Nationwide, which are being wound down, were being viewed differently.

....While concerns about the sector's level of capital should abate over the next 12 months, Elderfield said the process of shrinking their assets and improving their funding base would take much longer. "That is a project that will take years."

Elderfield said he will be far more intrusive in the banking sector in future. In particular, there will be regular checks on how much liquidity or cash-like assets banks have to ride out short-term turbulence in markets...

Whisper it softly, but… is that?… can it be?… a light at the end of the tunnel of Europe's banking crisis?

The answer may yet be: "No, it's an oncoming train of disorderly sovereign default," but the news flow has, at the very least, stopped getting worse, and in some quarters is improving beyond any reasonable doubt.

...

Everything about the methodology suggests this was the action of a new broom sweeping clean, unencumbered by the need to protect political and boardroom reputations. (Quite the reverse, in fact:Ireland's regulator, Matthew Elderfield, has announced plans to re-examine the fitness and probity of every single bank director in the country.)